9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 1127 - AT - Service TaxCENVAT credit - exempt service or not - compensation for performance of a separate service - endowment policies - ULIP scheme policy - applicability of rule 6 of CENVAT Credit Rules, 2004 - exclusions from assessment for the different periods in the two categories of policies - while Revenue asserts these to be covered by the inclusive component of exempted services and, thereby, rendering rule 6 of CENVAT Credit Rules, 2004 to be applicable, it is the primary submission of the appellant that such vivisection of a composite consideration for a particular service is not the intent of the said Rules. HELD THAT - It would not be out of place to peruse the inclusive component of the definition of exempted service which pertains to services that are not leviable to tax under section 66 of Finance Act, 1994. The most proximate of services that are subject to the levy are the entries in section 65(105) of Finance Act, 1994 as stated therein and it is only those which are exempted that can be held to be covered by the said definition which, having been described as the principal component, does not require restatement. It is obvious the legislature had not intended superfluity in incorporating the services that are not leviable to tax in the definition. There is no definition of service in Finance Act, 1994 and, therefore, forecloses an ascription that is non-existent. Consideration, though essential to determination of value of taxable service, is not the sole indicator of existence of a service. The presumption against superfluity in interpretation of statutes binds us to search for, and determine, the nature of inclusion. As we are dealing with the schema of mechanism for avoiding the cascading effect of taxation upon the final customer who bears the burden of indirect tax levy, it can be posted that there is a recipient of service with whom the buck stops. Such stoppage could be owing to lack of further commercial engagement of the service or because of the non-existence of such service within the jurisdiction to tax. Tax laws have nothing to do with the last consumer in the market chain. It would, therefore, leave us with no option but to determine that legislative intent of services that are not leviable to tax under section 66 of Finance Act, 1994 to be those to which the Union cannot extend its taxing arm. Not unnaturally, such service, unacknowledgeable in the tax jurisdiction, fails the test of utilization in rendering of further service. These, therefore, cannot be input services and the inclusive portion of exempted services must be construed as referring to such and not to services that, though not yet, may still be subject to levy. The proposition of Revenue that subsequent taxability imprints upon it the description of non-leviable under section 66 of Finance Act, 1994 fails and, with it, the support for sustaining the demand in the impugned order. The detriments also fail. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Denial of CENVAT credit on taxable services consumed by the assessee for rendering both taxable and non-taxable services. 2. Tax liability on different insurance products, specifically 'endowment policies' and 'unit linked insurance policies (ULIP scheme)'. 3. Applicability of Rule 6 of CENVAT Credit Rules, 2004. 4. Interpretation of 'exempted services' under CENVAT Credit Rules, 2004. 5. Legislative intent and interpretation of taxability of services under Finance Act, 1994. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit: The core issue in this appeal is the denial of CENVAT credit amounting to ?1,08,26,44,321, which pertains to 'endowment policies' and 'ULIP scheme policy'. The denial is based on the assertion that a part of the consideration received from the recipient of service is untaxed, implying it compensates for a separate service. This leads to the denial of otherwise eligible CENVAT credit on taxable services consumed by the assessee for rendering both taxable and non-taxable services proportionately. 2. Tax Liability on Insurance Products: The appellant offers various insurance products, including 'term policy', 'endowment policy', and 'unit linked insurance policy (ULIP scheme)'. The tax liability on 'life insurance business' was defined in section 2(11) of the Insurance Act, 1938, and incorporated in section 65(51) of the Finance Act, 1994. The taxability of these services has evolved through different notifications, with significant changes occurring through notification no. 23/2004-ST dated 10th September 2004 and further amendments in 2008 and 2011. The dispute pertains to the period from 1st April 2008 to 31st March 2011, with specific demands of ?4,93,60,166 for 'unit linked insurance policies' and ?103,32,84,155 for 'endowment policies'. 3. Applicability of Rule 6 of CENVAT Credit Rules, 2004: Rule 6 of CENVAT Credit Rules, 2004, restricts the credit on input services used for providing exempted services. The appellant was considered a provider of 'exempted services' as defined in Rule 2(e) of CENVAT Credit Rules, 2004, due to the exclusion from levy on certain portions of the premium. The appellant contested that they provide a single service of 'life insurance business' and that the statute intended a single service, not subject to vivisection for tax purposes. 4. Interpretation of 'Exempted Services': The appellant argued that the definition of 'exempted service' requires the whole service to be exempt for Rule 6 restrictions to apply. They cited the Tribunal's decision in Sahara India Life Insurance Co Ltd v. Commissioner of Central Excise, which held that the value on which Revenue demanded the amount under Rule 6(3) does not represent exempted services. The Tribunal agreed that the taxable service is not wholly exempt and emphasized that the investment portion of the premium does not represent a separate service. 5. Legislative Intent and Interpretation of Taxability: It was argued that the legislative intent did not support the vivisection of a composite consideration for a particular service. The appellant maintained that the investment portion of the premium is intended to facilitate the insurer's commitment to returns, not to benefit the policyholder. The Tribunal noted that subsequent taxability of a service does not imply it was non-leviable before the date of incorporation. The Tribunal also referred to the inclusive component of 'exempted services', which pertains to services not leviable to tax under section 66 of the Finance Act, 1994, and concluded that the legislative intent was not to include services that may be subject to levy in the future. Conclusion: The Tribunal allowed the appeal, setting aside the impugned order. It concluded that the subsequent taxability of services does not automatically classify them as 'exempted services' under Rule 2(e) of CENVAT Credit Rules, 2004, and the demand for reversal of CENVAT credit was unsustainable. The Tribunal emphasized the need for a clear legislative measure to isolate the value of any purported exempted service, which was absent in this case.
|
